<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24696
NATIONAL DIAGNOSTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 59-3248917
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
755 West Brandon Blvd., Brandon, Florida 33511
---------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: (813) 661-9501
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Class: Common Stock, No Par Value Outstanding at August 13, 1997: 4,538,035
Transitional Small Business Disclosure Format (check one) YES [ ] NO [X]
Page 1 of 39
<PAGE> 2
NATIONAL DIAGNOSTICS, INC.
INDEX TO FORM 10-QSB
<TABLE>
Page
Number
------
<S> <C>
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
December 31, 1996 and June 30, 1997 3
Condensed Consolidated Statements of Operations
for the three and six months ended June 30,
1996 and 1997 5
Condensed Consolidated Statements of Cash Flows
for the three and six months ended
June 30, 1996 and 1997 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 2. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
2
<PAGE> 3
ITEM - 1.
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
December 31, 1997
1996 (Unaudited)
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 104,335 $ 72,874
Accounts receivable, net of allowance of $664,402 in
1996 and $735,755 in 1997 2,131,284 2,339,010
Due from related party 23,819
Prepaid expenses and other current assets 220,864 138,332
Marketable securities 1,800,000
----------- ------------
Total current assets 2,456,483 4,374,035
----------- ------------
Property and equipment 9,481,198 9,981,296
Less: accumulated depreciation and
amortization (3,264,655) (3,925,262)
----------- ------------
Net property and equipment 6,216,543 6,056,034
----------- ------------
Other assets:
Excess of purchase price over net assets
acquired, net of accumulated amortization
of $61,274 in 1996 and $73,512 in 1997 428,187 415,949
Organization and start-up costs, net 47,444 51,526
Deposits 51,020 48,263
----------- ------------
Total other assets 526,651 515,738
----------- ------------
$ 9,199,677 $ 10,945,807
=========== ============
</TABLE>
See Accompanying Notes.
3
<PAGE> 4
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,
December 31, 1997
1996 (Unaudited)
---------------- ---------------
<S> <C> <C>
Current liabilities:
Lines of credit $ 993,818 $ 1,224,654
Note payable 4,294 67,082
Note due related party 99,882 127,075
Current installments of long-term debt 105,410 105,000
Current installments of obligations under
capital leases 1,103,952 1,104,000
Accounts payable 1,080,236 1,269,393
Accrued radiologist fees 489,785 562,640
Accrued expenses other 738,687 528,199
----------- -----------
Total current liabilities 4,616,064 4,988,043
Long-term liabilities:
Long-term debt, excluding current installments 619,227 731,387
Obligations under capital leases, excluding
current installments 3,454,456 3,253,165
Deferred lease payments 236,912 207,217
----------- -----------
Total liabilities 8,926,659 9,179,812
----------- -----------
Stockholders' equity:
Preferred stock, no par value, 1,000,000
shares authorized, no shares issued
and outstanding - -
Common stock, no par value, 9,000,000
shares authorized, 2,539,629 and 4,481,220 shares
issued and outstanding in 1996 and 1997 686 1164
Additional paid-in capital 2,320,497 4,591,143
Retained earnings (deficit) (2,048,165) (2,826,312)
----------- -----------
Net stockholders' equity 273,018 1,765,995
----------- -----------
$ 9,199,677 $10,945,807
=========== ===========
</TABLE>
See Accompanying Notes.
4
<PAGE> 5
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue, net $2,293,429 $2,612,347 $4,483,135 $5,189,235
---------- ---------- ---------- ----------
Operating expenses:
Direct operating expenses 1,136,255 1,497,338 2,192,411 2,895,834
General and administrative 783,444 1,012,833 1,506,348 1,980,128
Depreciation and amortization 256,026 372,842 500,907 738,927
---------- ---------- ---------- ----------
Total operating expenses 2,175,725 2,883,013 4,199,666 5,614,889
---------- ---------- ---------- ----------
Operating income (loss) 117,704 (270,666) 283,469 (425,654)
Interest expense 116,093 188,528 213,930 358,274
Other income 9,183 299 41,625 5,781
---------- ---------- ---------- ----------
Income (loss) before income taxes 10,794 (458,895) 111,164 (778,147)
Income taxes - - -
---------- ---------- ---------- ----------
Net income (loss) $ 10,794 (458,895) $ 111,164 $ (778,147)
========== ========== ========== ==========
Net income (loss) per
common share $ - $ (.17) .04 $ (.29)
Weighted average number of common ---------- ---------- ---------- ----------
shares outstanding 2,551,758 2,714,341 2,545,694 2,671,696
---------- ---------- ---------- ----------
</TABLE>
See Accompanying Notes.
5
<PAGE> 6
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 10,334 $(458,895) $ 110,704 $(778,147)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Income taxes - - - -
Depreciation and amortization 256,026 372,842 500,907 738,927
Provision for Bad Debts 51,700 80,872 74,100 71,353
(Increase) decrease in accounts receivable (274,567) (70,618) (648,274) (279,079)
Loss on disposition of equipment 494 - 4,871 2,770
(Increase) decrease in prepaid
expenses and other current assets 108,773 16,093 54,873 82,985
Increase (decrease) in accounts payable 354,852 169,072 419,360 340,405
Increase (decrease) in accrued radiologist fees 37,913 118,882 93,296 72,855
Increase (decrease) in other accrued expenses (35,507) (93,172) (7,614) (26,524)
Decrease in deferred lease payments (10,339) (14,251) 55,586 (29,695)
---------- --------- --------- ---------
Net cash provided (used) by operating activities 364,951 120,825 523,081 195,850
---------- --------- --------- ---------
Cash flows provided (used) by investing activities:
Purchases of property and equipment (273,095) (78,841) (292,022) (217,288)
Increase in deposits (11,359) (200) (11,359) (819)
Increase in organization & start-up costs (134,728) (3,403) (134,728) (66,588)
---------- --------- --------- ---------
Net cash used by investing activities (273,095) (82,444) (292,022) (284,695)
Cash flows provided (used) by financing activities: ---------- --------- --------- ---------
Increase in line of credit 60,000 178,100 101,000 230,836
Proceeds from long-term borrowings - 150,000 - 150,000
Repayment of long-term borrowings (24,985) (18,637) (48,182) (38,250)
Proceeds of borrowing from related parties (2,328) - 16,255 125,000
Repayment of borrowing from related parties - (2,001) - (6,167)
Proceeds from other notes payable - - - 205,000
Repayment of other notes payable (4,644) (93,165) (8,000) (142,212)
Principal payments under capital lease obligations (138,379) (331,773) (275,187) (466,823)
---------- --------- --------- ---------
Net cash used by financing activities (121,695) (117,476) (225,473) 57,384
---------- --------- --------- ---------
Net increase (decrease) in cash (29,839) (79,095) 5,586 (31,461)
Cash at beginning of period 163,519 151,969 128,094 104,335
---------- --------- --------- ---------
Cash at end of period $ 133,680 $ 72,874 $ 133,680 $ 72,874
========== ========= ========= =========
</TABLE>
6
<PAGE> 7
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
See Accompanying Notes. (continued)
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Supplemental disclosure of cash
flow information - Interest paid $ 134,000 $ 251,330 $ 220,000 $ 402,287
========== ============ ============ ============
Stock issued as satisfaction for trade $ - $ 175,520 $ - $ 175,520
creditor debt ========== ============ ============ ============
Stock issued for equipment acquisition $ - $ 20,000 $ - $ 20,000
========== ============ ============ ============
Stock issued as satisfaction of related $ - $ 275,604 $ - $ 275,604
party debt ========== ============ ============ ============
Stock issued in exchange for marketable $ - $ 1,800,000 $ - $ 1,800,000
securities ========== ============ ============ ============
Asset added under capital lease $ 66,214 $ 68,925 $ 689,337 $ 265,580
========== ============ ============ ============
Note received for pre-opening costs $ - $ - $ 77,904 $ -
========== ============ ============ ============
</TABLE>
See Accompanying Notes.
7
<PAGE> 8
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by National Diagnostics, Inc., and
Subsidiaries (the "Company") for quarterly financial reporting
purposes are the same as those disclosed in the Company's annual
financial statements. In the opinion of management, the accompanying
condensed consolidated financial statements reflect all adjustments
(which consist only of normal recurring adjustments) necessary for a
fair presentation of the information presented.
The quarterly condensed consolidated financial statements herein
have been prepared by the Company without audit. Certain information
and footnote disclosures included in financial statements prepared
in accordance with generally accepted accounting principles have
been condensed or omitted. Although the Company management believes
the disclosures are adequate to make the information not misleading,
it is suggested that these quarterly condensed consolidated
financial statements be read in conjunction with the audited annual
financial statements and footnotes thereto.
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
MARKETABLE SECURITIES
Marketable Securities- Marketable securities (classified as
securities available for sale) are stated at fair value based on an
average quoted market value. The Company acquired on June 27, 1997,
127,773 shares of common stock (net of 14,197 shares given in
payment of commission) of Equisure, Inc. (American Stock Exchange:
EQE) from an investment trust in exchange for its own common stock.
The trust retains the right to buy back its shares during the course
of the one year agreement at the stated value of $20 per share.
There is an agreement in place with the trust that in the event the
market value of the shares go down, additional shares will be issued
to effectively eliminate the market risk. The exchange of shares may
be made quarterly though out the term of the agreement. Management
intends to utilize the securities to secure borrowings and intends to
sell the shares upon completion of the agreement term.
Equisure, Inc. is a reinsurance company with shares outstanding
of approximately 11,000,000 with a public float of approximately
6,000,000 shares. Information taken from Equisure, Inc. audited
financial statements as of December 31, 1996, indicated: total
assets of approximately $76,692,000; shareholder equity of
$37,031,000; 1996 revenues of $13,265,000; and earnings per share of
$0.42. The financial statements contained an unqualified opinion by
the independent accountants. Based on the unaudited financial
statements for the quarter ending March 31, 1997 the financial
position did not change materially.
On August 4, 1997 the AMEX called a halt to trading EQE shares on
the AMEX. In its own investigation the Company has not received any
information to indicate there has been a permanent impairment of the
securities' valuation. However, as of August 4, 1997 the fair
value of the securities is uncertain.
OPERATIONAL MATTERS AND LIQUIDITY
The Company has a net loss for the quarter ending June 30, 1997 of
$458,895 and at June 30, 1997 has a working capital deficiency of
approximately $614,000. Prior to June 27, 1997 (the effective date
of the security transaction described under Marketable Securities),
the working capital deficiency approximated $2,414,000.
Collectively, these factors have resulted in late lease payments
which have payment acceleration provisions. In view of these
matters, recoverability of a major portion of the recorded asset
amounts shown in the accompanying balance sheet is dependent upon
continued operation of the Company, which in turn is dependent upon
either the Company's ability to succeed in its future operations or
its ability to obtain additional funding. The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence. The following commentary
addresses the Company's operations for the second quarter of 1997 and
its plan to improve future results.
8
<PAGE> 9
NATIONAL DIAGNOSTICS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company attributes the loss in the second quarter primarily to
the effect the losses from its new start up facilities had on the
Company: Orange Park in its second full year of operation incurred a
second quarter loss of $61,000 and Riverside (opened July of 1996)
had a loss of $188,000, and a combined one time write-down of
approximately $100,000 experienced by the Companies two older
centers from a discontinued capitation contract (replaced by a fee
for service contract). Due to the expansion and growth the Company's
working capital has decreased to the extent that the Company has
fallen behind in meeting its lease and vendor obligations. Most of
the vendors have been cooperative by allowing extended terms. The
Company has received from its major lessor a waiver of default based
on the Company adhering to a workout schedule which will bring the
leases to current status by December, 1997. Other lessors have also
been cooperative with extended terms. The Company believes as the
increase in revenues for start ups continues and certain cost
cutting measures (estimated unaudited annual savings approximately
$134,000) take effect that the Company will return to a profitable
position though no absolute assurances can be given.
(2) NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards No.
128. Earnings Per Share, which is effective for financial statements
issued after December 15,1997. Early adoption of the new standard is
not permitted. The new standard eliminates primary and fully diluted
earnings per share requires presentation of basic and diluted
earnings per share and requires presentation of basic and diluted
earnings per share together with disclosure of how the per share
amounts were computed. The adoption of this new standard is not
expected to have a material impact on the disclosure of earnings per
share in the financial statements.
(3) LEGAL ACTION
In December of 1995, the physician group terminated its contract for
reading service with the Brandon and SunPoint centers and in
February of 1996, filed suit against the centers alleging the
centers materially breached the contract by failing to pay physician
fees timely and incorrectly billed certain procedures. The physician
group sought payment for services rendered (approximately $178,000)
and lost profits (approximately $850,000). In February of 1997, the
court denied the claim for lost profits and entered an award in
favor of the physician group relating to services rendered. The
company substantially reserved for the claim for services and
satisfied the judgement in February of 1997 by obtaining financing
for approximately $205,000 from its accounts receivable lender
(balance due by August, 1997). Subsequently, a motion by the
physicians for a rehearing was denied. The physicians filed a notice
of appeal for the lost profits claim in April, 1997. A motion by the
physicians for costs relating to the lawsuit (approximating $10,000)
was awarded by the Court to the physicians and was paid by the
Company.
On March 10, 1995 legal action was instituted against A.T. Brod &
Co., Inc. (a national stock brokerage firm) by a terminated
employee of A.T. Brod & Co., Inc. ("A.T. Brod"). A.T. Brod was a
major market maker for National Diagnostics, Inc. stock. The Company
was named in the suit entitled James I. Blackey vs. A.T. Brod & Co.,
Inc., Arthur Stupay, Jugal Taneja, R.K. Khosla, Bancapital Investment
Corporation, and National Diagnostics, Inc. pending the Supreme Court
of the State of New York, County of Erie, Index Number I-1995- 2249.
Mr. J. Taneja is Chairman, Chief Executive Officer and Director of
both A.T. Brod and the Company. The action alleges wrongful
discharge, breach of contract, deformation of character, conspiracy
and tortious interference with a contract arising out of the alleged
wrongful termination of the plaintiff by A.T. Brod and sought
compensatory and punitive damages of $2,830,000. In April of 1997
the Company reached a settlement for $5,000 which has been paid by
the Company.
(4) EXCHANGE AGREEMENT
On June 27, the Company exchanged 1,459,188 shares of restricted
Company Common Stock with Sud Afric Suisse Trustees (a foreign
trust) in exchange for 127,773 common shares of Equisure, Inc.
Common Stock (net of 14,197 shares given in payment of commission).
The exchange was valued at $2,000,000 less a ten percent commission
paid in Equisure, Inc. shares by the Company. The shares of Company
Common stock were issued by the Company pursuant to Regulation S
promulgated under the Securities Act of 1933, as amended. Sud Afric
Suisse Trustees purchased the Company's Common Stock subject to the
restriction that the "Purchaser" is precluded from offering and
selling to U.S. persons or the account or benefit of a U.S. person,
for a period of forty (40) days commencing with the date of the
exchange. The Exchange Agreement includes repurchase options in
favor of the Commpany and Sud Afric Suisse Trustees which are
exercisable during the first year after June 27, 1997 prusuant to
which the Company and Sud Afric Suisse Trustees retain the right to
re-purchase their respective shares. The shares may be repurchased
at the stated values of $1.6125 and $20.00 per share by the Company
and Sud Afric Suisse Trustees, respectively.
(5) SUBSEQUENT EVENT
On August 18, 1997 the Company was notified by The Nasdaq Stock
Market, Inc. ("Nasdaq") that the Company's securities would be
de-listed from the Nasdaq Small Cap Market (SM) effective with the
close of business on August 18, 1997. The Company had previously
announced it was in discussions with Nasdaq concerning the Nasdaq
listing requirements and the Company's capital surplus. Nasdaq took
this action as a result of the Equisure, Inc. shares carried on the
Company's balance sheet and the uncertainty created by the action
taken by the American Stock Exchange on August 4, 1997 to call an
indefinite halt to trading Equisure, Inc. securities on the AMEX.
The Company is currently evaluating its position in light of this
decision by Nasdaq.
9
<PAGE> 10
ITEM- 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the condensed
consolidated financial statements and notes thereto included elsewhere herein.
RESULTS OF OPERATIONS
Net revenues for the six months ended June 30, 1997 were $5,189,235 compared to
$4,483,135 for the same period in 1996, representing a 16% increase. The
increase is primarily attributable to an increase in the volume of procedures
performed. The Company generated net revenues of $473,000 in the first half of
1997 as a result of the addition of the National Diagnostics/Riverside
("Riverside").
Direct operating expenses for the six months ended June 30, 1997 were
$2,895,834 compared to $2,192,411 for the same period in 1996, representing a
32% increase. Approximately 46% of the increase in direct costs is directly
attributable to the addition of Riverside. The balance of the increase is the
result of higher medical supply costs experienced in each center, maintenance
contracts and repair costs in the Company's most mature and productive center,
and higher reading fee costs experienced in the National Diagnostics/Orange
Park, Inc. ("Orange Park") facility. Management believes it can obtain more
favorable medical supply costs if working capital were sufficient to meet vendor
terms.
General and administrative expenses for the six months ended June 30, 1997 were
$1,980,128 compared to $1,012,833 for the same period in 1996, representing a
31% increase. The increase is primarily attributable to the addition of the
Riverside facility and additional personnel costs. Personnel were added in
response to the increase volume of procedures performed overall and the
expansion of facilities.
The 47% increase in depreciation and amortization costs for the first six
months of 1997 over that for the same period in the preceding year is primarily
attributable to the additional equipment acquired for the Riverside facility
and the nearly fully amortized start-up costs of Riverside (approximately
$54,000 in first six months).
The increased revenues over the revenues experienced in the same period in 1996
were offset by the 34% increase in operating expenses resulting in a net loss
of $270,666 and $425,654 for the quarter ending and six month period ending
June 30, 1997, respectively. Net revenues for the Brandon Diagnostic Center
("Brandon"), the Company's most mature center, were down by one half percent
after a one time write down of approximately $60,000 for a terminated
capitation contract. The contract has been replaced with fee for service
contracts which the Company feels will allow for a more timely realization of
receipts. The slight decline in revenue coupled with increased costs for
maintenance contracts and medical supplies resulted in a second quarter profit
of $31,000 compared to $181,000 in the same quarter of 1996. Sunpoint
Diagnostic Center ("Sunpoint") experienced a net loss of approximately $22,000
on revenues of $332,000 compared to a net loss of $18,000 on revenues of
$311,000 in the same quarter of 1996. This resulted primarily from a one time
writedown of approximately $38,000 for a terminated capitation contract. The
contract has been replaced with fee for service contracts which the Company
feels will allow for a more timely realization of receipts. Also, Sunpoint
experienced an increase in equipment repair costs and personnel costs. Orange
Park experienced a loss of $61,000 on revenues of $876,000 for the quarter
ending June 30, 1997 compared to a loss of $43,000 on revenues of $780,000 for
the same quarter in 1996. This is the result of higher personnel costs due to
the increased volume and higher reading fees. Riverside, which started up in
the third quarter of 1996, experienced a $188,000 loss on revenues of $263,000
compared to a $195,000 loss on revenues of $211,000 in the preceding quarter.
Management expects the Riverside facility to experience a positive ramp up
after entering into a temporary six month contract (while a permanent contract
is negotiated) for services with the University of Florida.
LIQUIDITY AND CAPITAL RESOURCES
Due to the rapid expansion of facilities and increase in additional personnel
and related costs the Company has continued to experience difficulty in meeting
timely its current obligation to its vendors and lessors. Throughout all but a
few days of the 2nd quarter the Company had a working capital deficiency of
more than $2,000,000. Due to late payments in the first quarter of 1997 the
Company was in default of its capital leases. In April the Company received a
conditional waiver of
10
<PAGE> 11
default from its major lessor. The conditional waiver of default from its major
lessor contains a work out schedule where in all leases will be brought to a
current status by December 31, 1997. The agreement was predicated upon the
Company making a $200,000 payment toward arrearage by April 25, 1997. The
Company paid the $200,000, a portion of which came out of proceeds from a
second mortgage note given on its Sundance property and is currently in
compliance with the work out agreement. The other lessors (approximately 17% of
the total loans outstanding at June 30, 1997) have been cooperating with the
Company, generally allowing not more than 60 days past due on lease payments.
There is no assurance the Company will be successful in achieving these goals.
Capital expenditures, including capital lease obligations for the quarter
ending June 30, 1997 approximated $151,000.
In February of 1997 the Company settled its litigation with its prior
radiologists (see Item 3-Legal Proceedings). The settlement plus legal fees
approximated $205,000. This amount was borrowed from DVI in 1997 at an interest
rate of "base" plus 3% (at June 30, 1997 11.5%). The loan calls for 28 weekly
payments of $7,500; the balance to be paid in full by August 29, 1997. The loan
is secured by accounts receivable and is being paid out of current collections.
The Company is current with its payments.
The Company has a $2,000,000 line of credit with DVI Business Credit
Corporation ("DVI", a lender specializing in medical receivables). The lender
has a first security interest on all accounts receivable. Interest is a prime
plus 1.6%. At June 30, 1997 the line availability and loan balance approximated
$300 and $1,224,881, respectively. At August 12, 1997 the line availability and
loan balance approximated $300 and $1,147,000, respectively.
The Company issued 114,583 shares of common stock in satisfaction of trade
creditor debt; 278,872 shares of common stock in satisfaction of related party
debt; and 1,459,188 common shares in exchange for 127,773 shares of Equisure,
Inc. common stock (American Stock Exchange: EQE). The transactions were
intended to improve the operating and financial flexibility of the Company.
Contained in the exchange agreement with Sud Afric Suisse Trust is a provision
that effectively eliminates any market risk with the exchanged shares.
Quarterly, throughout the one year term of the agreement where there is a
market drop in the value of the securities, additional shares will be exchanged
wherein the market disparigy will be eliminated and returned to that which was
in existence in the initial exchange. On August 4, 1997, the AMEX called a
halt to the trading of EQE shares on the AMEX. In its own investigation the
Company has not received any information to indicate there has been a permanent
impairment of the asset. As of August 4, 1997, the fair value of the
securities is uncertain.
On August 18, 1997 the Company was notified by The Nasdaq Stock Market, Inc.
("Nasdaq") that the Company's secutities would be de-listed from the Nasdaq
effective with the close of business on August 18, 1997. The Company had
previously announced it was in discussions with Nasdaq concerning the Nasdaq
listing requirements and the Company's capital surplus. Nasdaq took this
action as a result of the Equisure, Inc. shares carried on the Company's
balance sheet and the uncertainty created by the action taken by the American
Stock Exchange on August 4, 1997 to call an indefinite halt to trading
Equisure, Inc. securities on the AMEX. The Company is currently evaluating its
position in light of this decision by Nasdaq.
In the quarter ending June 30, 1997 the company decreased its cash by
approximately $79,000. Operations contributed $121,000 of the total increases.
Purchases of equipment and a minor increase in other assets contributed $82,000
to the cash reduction. Financing activities used $117,000. Equipment acquired
through capital leasing approximated $69,000.
In May of 1997, the Company entered into a Consulting Agreement with Capital
Access Bureau, Inc. ("CABI") for investor and public relations services. CABI
will receive as compensation $350,000 recognizable and payable over the one
year term of the agreement in common shares of the Company. The Company will
also issue six incentive stepped options of 75,000 shares each step beginning
at $1.50 per share which approximates the value of the stock at date of grant
and stepped in fifty cent increments. CABI agrees to execute any in the money
options quarterly throughout the term of the agreement. If the Company stock
were to reach a level of $4.00 per share within the term of the agreement, this
wold bring in approximately $1,237,000 to the Company.
The Company intends to curtail further external expansion (new start-ups or
acquisitions) until the Company's current new start-ups achieve acceptable
levels of operation, and/or the Company achieves additional capital infusion.
The Company is currently considering different alternatives which includes but
are not limited to capital infusion and/or merger or sale of the Company.
The Company entered into a temporary six-month contract that is expected to
accelerate the ramp up of its newest start-up facility. The contract could
result in an estimated increase in net revenues of approximately $500,000 to
$800,000. As a result of the Company acquiring $1.8 million in securities,
increasing revenues coupled with an accelerated ramp up of its newest start-ups
in 1995 and 1996, satisfaction of its property and equipment needs for current
operations, and if the Company's vendors and
11
<PAGE> 12
lessors continue to allow a grace period of sixty to ninety days, the Company
believes that its presently anticipated short-term needs for operation, capital
repayments and capital expenditures for its current operations can be satisfied
through internally generated funds, existing credit facilities with DVI, and
funds obtained by leveraging its securities. The Company feels that its ability
in the short-term to improve its working capital is reasonably attainable.
However, the Company is currently discussing capital infusion alternatives
which may consist of selling additional stock. Should the above possibilities
not materialize and to assure continued operations the Company is prepared to
sell off certain assets that have not yet matured sufficiently to allow a
positive return. There is no assurance that these short-term needs can be met.
The Company's long term growth strategies will require additional funds. In the
event that the Company proceeds with the establishment of additional
facilities, or encounters favorable acquisition opportunities in the near
future, the Company may incur, from time to time, additional indebtedness and
attempt to issue equity or debt securities in public or private transactions.
There is no assurance that the Company will be successful in securing
additional financing or capital through equity or debt securities.
The Company's financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company's independent certified public
accountant's report on the Company's 1996 Financial Statements contained in the
Company's Annual Form 10-KSB included a going concern qualification. The
information contained in Note 2 to the Financial Statements included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1996 remains relevant related to the status of certain of the Company's
operational and funding matters and, accordingly, should be referred to in
conjunction with this Form 10-QSB.
PART II. OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
In December of 1995, the physician group terminated its contract for reading
service with the Brandon and SunPoint centers and in February of 1996, filed
suit against the centers alleging the centers materially breached the contract
by failing to pay physician fees timely and incorrectly billed certain
procedures. The physician group sought payment for services rendered
(approximately $178,000) and lost profits (approximately $850,000). In February
of 1997, the court denied the claim for lost profits and entered an award in
favor of the physician group relating to services rendered. The company
substantially reserved for the claim for services and satisfied the judgement
in February of 1997 by obtaining financing for approximately $205,000 from its
accounts receivable lender (balance due by August, 1997). Subsequently, a
motion by the physicians for a rehearing was denied. The physicians filed a
notice of appeal for the lost profits claim in April, 1997. A motion by the
physicians for costs relating to the lawsuit (approximating $10,000) was
awarded by the Court and paid by the Company.
On March 10, 1995 legal action was instituted against A.T. Brod & Co., Inc. (a
national stock brokerage firm) by a terminated employee of A.T. Brod & Co., Inc.
("A.T. Brod"). A.T. Brod was a major market maker for National Diagnostics,
Inc. stock. The Company was named in the suit entitled James I. Blackey vs. A.T.
Brod & Co., Inc., Arthur Stupay, Jugal Taneja, R.K. Khosla, Bancapital
Investment Corporation, and National Diagnostics, Inc. pending the Supreme Court
of the State of New York, County of Erie, Index Number I-1995-2249. Mr. J.
Taneja is Chairman, Chief Executive Officer and Director of both A.T. Brod and
the Company. The action alleges wrongful discharge, breach of contract,
deformation of character, conspiracy and tortious interference with a contract
arising out of the alleged wrongful termination of the plaintiff by A.T. Brod
and sought compensatory and punitive damages of $2,830,000. In April of 1997
the Company reached a settlement for $5,000 which has been paid by the Company.
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.43 Exchange Agreement, dated June 27, 1997 by and between National
Diagnostics, Inc. and Sudafric Suisse Trustees (Exhibit 10.43
to the Company's Form 8-K dated July 22, 1997 is incorporated
by reference herein).
10.44 Professional Services Agreement, dated May 15, 1997 by and
between National Diagnostics, Inc. and University of Florida,
for and on behalf of the Board of Regents of the State of
Florida, for the Benefit of the Department of Radiology/UFHSCJ,
College of Medicine, University of Florida.
10.45 Consulting Agreement, dated May 27, 1997 by and between
National Diagnostics, Inc. and Capital Access Bureau, Inc.
10.46 Funding Agreement, dated May 27, 1997, by and between National
Diagnostics, Inc. and Capital Access Bureau, Inc.
10.47 Professional Services Agreement dated August 1, 1997 by and
between National Diagnostics, Inc. and Nancy C. Lawhon, M.D.,
P.C.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
The Company filed on July 22, 1997, a Form 8-K indicating the
private placement with Sud Afric Suisse Trust in exchange for
Equisure, Inc. Common Shares valued at $1.8 million and debt to
equity conversions approximating $471 thousand.
The following financial statements were filed in the Form 8-K:
Condensed consolidated balance sheet as of March 31,
(historical and proforma) and May 31, 1997 (proforma).
Condensed consolidated statements of operations for year ended
December 31, 1996 and May 31, 1997 (proforma).
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 19, 1997
NATIONAL DIAGNOSTICS, INC.
/s/ Jugal K. Tanega
-------------------------------------
Jugal K. Tanega
Chairman and Chief Executive Officer
/s/ Dennis C. Hult
-------------------------------------
Dennis C. Hult
Comptroller
14
<PAGE> 15
<TABLE>
<CAPTION>
NATIONAL DIAGNOSTICS, INC.
EXHIBIT INDEX TO FORM 10-QSB
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
10.43 Exchange Agreement, dated June 27, 1997 by and between National
Diagnostics, Inc. and Sudafric Suisse Trustees (Exhibit 10.43 to the
Company's Form 8-K dated July 22, 1997 is incorporated by reference
herein).
10.44 Professional Services Agreement, dated May 15, 1997 by and between National
Diagnostics, Inc. and University of Florida, for and on behalf of the Board of Regents
of the State of Florida, for the Benefit of the Department of Radiology/UFHSCJ,
College of Medicine, University of Florida.
10.45 Consulting Agreement, dated May 27, 1997 by and between National Diagnostics,
Inc. and Capital Access Bureau, Inc.
10.46 Funding Agreement dated May 27, 1997 by and between National Diagnostics, Inc.
and Capital Access Bureau, Inc.
10.47 Professional Services Agreement dated August 1, 1997 by and between National
Diagnostics, Inc. and Nancy C. Lawhon, M.D., P.C.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
The Company filed on July 22, 1997, a Form 8-K indicating the
private placement with Sud Afric Suisse Trust in exchange for
Equisure, Inc. Common Shares valued at $1.8 million and debt to
equity conversions approximating $471 thousand.
The following financial statements were filed in the Form 8-K:
Condensed consolidated balance sheet as of March 31, (historical and
proforma) and May 31, 1997 (proforma).
Condensed consolidated statements of operations for year ended
December 31, 1996 and May 31, 1997 (proforma).
</TABLE>
15
<PAGE> 1
EXHIBIT 10.44
INTERIM AGREEMENT BETWEEN
UNIVERSITY OF FLORIDA
AND
NATIONAL DIAGNOSTICS, INC.
This Interim Agreement is to confirm the intention of the UNIVERSITY OF FLORIDA
("UNIVERSITY"), FOR AND ON BEHALF OF THE BOARD OF REGENTS OF THE STATE OF
FLORIDA, FOR THE BENEFIT OF THE DEPARTMENT OF RADIOLOGY/UFHSCJ, COLLEGE OF
MEDICINE, UNIVERSITY OF FLORIDA, and NATIONAL DIAGNOSTICS, INC. ("NDI"), to
enter into a formal agreement ("the Agreement") under which UNIVERSITY will
provide interpretation of radiographic examinations that have been performed by
NDI. Following are the terms and conditions under which the parties will
operate as of May 15, 1997, until the execution of the Agreement or until
termination of this Interim Agreement as set forth below:
1. The term of this Interim Agreement will span six (6) months from the
effective date of May 15, 1997. However, either party may terminate
this Interim Agreement with or without cause upon thirty (30) days
notice to the other party. Such notice shall be submitted in writing
via certified mail by the terminating party to the other party. As
promptly as practicable after the effective date of this Interim
Agreement, UNIVERSITY and NDI agree to use their respective best
efforts to negotiate, in good faith, the Agreement providing for the
services contemplated in this Interim Agreement. The Agreement will
contain standard and appropriate representations, warranties,
covenants, and conditions typical for a transaction of this size and
type.
2. UNIVERSITY's radiologists from its Department of Radiology/UFHSCJ will
provide interpretation of radiographic examinations that have been
performed by NDI.
3. Responsibility and expense for pickup and delivery of radiographic
examinations to UNIVERSITY will be borne by NDI.
4. UNIVERSITY's radiologists shall read, examine, and interpret all of the
radiographic examinations on patients referred to UNIVERSITY's
radiologists. UNIVERSITY's radiologists shall interpret radiographic
examinations and dictate a report which shall be made available to NDI
for processing on all studies performed each day, except in emergencies
or on occasions when reasonable radiological practice justifies a later
dictation of report. NDI shall direct the clerical typing and
distribution of the written reports based on the utilization of its own
resources, facilities, and staff personnel, at its own cost and expense.
5. UNIVERSITY will provide a list of all Department of Radiology faculty
including their areas of expertise with telephone and pager numbers for
consultation when necessary. UNIVERSITY will make available to NDI a
direct telephone line for questions and issues occurring on a daily
basis.
6. (a)For services provided by UNIVERSITY's radiologists pursuant to this
Interim Agreement, UNIVERSITY shall be responsible for billing and
collecting the professional component for patients whose third party
carrier requires separate billing (ex., Medicare and Medicaid) and NDI
shall be responsible for billing and collecting the technical component.
(b)For services provided by UNIVERSITY's radiologists pursuant to this
Interim Agreement, NDI shall be responsible for billing and collecting
the global fees for all other carriers who do not require separate
billing. All such NDI patients who receive medical services pursuant to
this Interim Agreement, or such patients' third party payors, shall be
billed on a global fee basis which shall include the fees for both
services rendered by UNIVERSITY's radiologists and for the services
rendered by NDI. In these cases, NDI shall act as the agent of
UNIVERSITY solely with respect to billing and collection of the
professional fees for services provided to NDI's patients by
UNIVERSITY's radiologists. In such billings, NDI may indicate on its
bill that it is billing in the name of UNIVERSITY. NDI shall not,
however, be required to initiate suit to obtain payment except in
accordance with its standard policies and procedures.
Page 1 of 3
<PAGE> 2
(c)Upon request by UNIVERSITY, NDI shall make available for inspection
by UNIVERSITY copies of all bills which it renders which include
billing for services of UNIVERSITY's radiologists. NDI shall provide
UNIVERSITY with a monthly summary of billing and collection activity or
when reasonably required.
(d)Any checks or other instruments received by UNIVERSITY for services
rendered pursuant to this Agreement which represent payment for global
fees shall be endorsed over to NDI for application in accordance with
the provisions of this Agreement.
7. NDI will pay to UNIVERSITY eighteen percent (18%) of the gross receipts
of the total global fee received by NDI, when services are provided by
UNIVERSITY's radiologists, minus refunds, and minus fees for studies
for which UNIVERSITY did not provide reading and/or interpretation. To
offset additional expenses, this percentage will increase on a scale to
be negotiated in the Agreement.
8. NDI will pay UNIVERSITY by the twenty-fifth (25th) day of the month
after the month-end on the previous month's gross receipts specifically
on the basis of the arrangement described in Section 7. Payment will be
made to University of Florida Jacksonville Physicians, Inc., P. O. Box
44008, Jacksonville, Florida 32231-4008. NDI shall include with the
monthly payment a line item report by patient, representing
documentation of radiographic examinations interpreted for which
payment by NDI is being made. In the event that payment is not made by
NDI by the twenty-fifth (25th) day of the month, NDI agrees to pay
UNIVERSITY a one and one-half percent (1.5%) late charge per month
which will be assessed on the unpaid balance.
9. To the extent that the State of Florida, on behalf of the Florida
board of Regents, has partially waived its immunity to tort
claims and is vicariously responsible for the negligent acts and
omissions of its employees and agents as prescribed by Section 7687.28,
Florida Statutes, UNIVERSITY is protected for a claim or judgement by
any one person in a sum not exceeding One Hundred Thousand Dollars
($100,000), and for a total claim or judgement arising out of the same
incident or occurrence in a total amount not exceeding Two Hundred
Thousand Dollars ($200,000), such protection being provided by the
University of Florida Health Science Center/Jacksonville Self-Insurance
Program, a self-insurance program created pursuant to the authority of
Section 240.213, Florida Statutes. The Board of Regents has not
purchased liability insurance coverage beyond those limits outlined in
Section 768.28, Florida Statutes. Employees and agents of UNIVERSITY
are not generally individually liable for or subject to actions arising
from their state functions, except as provided in Section 768.28(9)(a),
Florida Statutes. Damages allocated against the Board of Regents as
prescribed by Section 766.112, Florida Statutes, are not subject to
reallocation under the doctrine of joint-and-several liability to
codefendants of the Board of Regents in professional liability actions.
The sole remedy available to a claimant to collect damages allocated to
the Board of Regents is as prescribed by Section 768.28, Florida
Statutes. Health Science Center/Jacksonville Self-Insurance program
provides ongoing protection with no expiration. UNIVERSITY agrees to
fully cooperate with NDI in its efforts to notify patients that they
will be receiving care from Board of Regents employees, and liability,
if any, that may arise from that care is limited as provided by law.
10. This interim Agreement supersedes any or all prior agreements,
understandings and arrangements between the parties relating to
the subject matter hereof.
Page 2 of 3
<PAGE> 3
INTERIM AGREEMENT BETWEEN THE UNIVERSITY OF FLORIDA AND NATIONAL DIAGNOSTICS,
INC. FOR RADIOGRAPHIC INTERPRETATIONS
ACKNOWLEDGED AND AGREED UPON BY:
NATIONAL DIAGNOSTICS, INC. UNIVERSITY OF FLORIDA, FOR
AND ON BEHALF OF THE BOARD OF
REGENTS OF THE STATE OF
FLORIDA, FOR THE BENEFIT OF
THE DEPARTMENT OF
RADIOLOGY/UFHSCJ, COLLEGE
OF MEDICINE,
UNIVERSITY OF FLORIDA
/s/Curtis L. Alliston 5/29/97 /s/Edward M. Copeland, III,M.D. 5/27/97
- --------------------------------- ----------------------------------------
Curtis L. Alliston Date Edward M. Copeland, III, M.D. Date
President Interim Dean
College of Medicine
University of Florida
/s/Frederick S. Vines, M.D. 5/28/97
----------------------------------------
Frederick S. Vines, M.D. Date
Associate Chairman
Department of Radiology/UFHSCJ
College of Medicine
University of Florida
/s/Louis S. Russo, Jr., M.D. 5/28/97
----------------------------------------
Louis S. Russo, Jr., M.D. Date
Senior Associate Dean for
Programs
College of Medicine
Assistant Vice President for Health
Affairs University of Florida
/s/David R. Challoner, M.D. 5/28/97
----------------------------------------
David R. Challoner, M.D. Date
Vice President for Health Affairs
University of Florida
Page 3 of 3
<PAGE> 1
EXHIBIT 10.45
CAPITAL ACCESS BUREAU, INC.
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT made this 27th day of May, 1997, by and between;
CAPITAL ACCESS BUREAU, INC.
225 Westmonte Drive / Suite 1170
Altamonte Springs, Fl 32714
Telephone: (407) 865 - 9857
a Florida Corporation (hereinafter referred to as "CABI"), and;
National Diagnostics, Inc.
751 West Brandon Blvd.
Brandon, Florida 33511
(813) 661 - 9501
(hereinafter referred to as "COMPANY"), collectively CABI and COMPANY
hereinafter referred to as "the parties".
WITNESSETH:
WHEREAS, CABI is an investor relations, direct marketing,
publishing, public relations, funding arrangement and advertising firm with
expertise in the dissemination of information about private and publicly
traded companies; and is in the business of providing investor relations
services, public relations services, publishing, arranging funding,
financing of private placements, advertising services, fulfillment
services, marketing of business formats, promotion of investment
opportunities and other related programs, services and products that are
designed to develop a constituency for COMPANY throughout the investment
and financial community; and
WHEREAS, COMPANY is publicly held with its common stock
trading on one or more stock exchanges and/or over-the-counter; or COMPANY
desires to become a publicly held company with its common stock trading on
one or more stock exchanges and/or over-the-counter; or COMPANY is a
privately held company in search of financing, funding, public relations
or other services which CABI provides, and
WHEREAS, COMPANY desires to publicize itself with the
intention of making its name and business better known to shareholders,
investors, brokerage houses, analysts, institutions, potential investors,
investment bankers and various media; and
WHEREAS, CABI is willing to accept COMPANY as a client.
WHEREAS, COMPANY requires a service or services offerred by
CABI and desires to employ and/or retain CABI to provide such services as
an independent contractor, and CABI is agreeable to such a relationship
and/or arrangement, and the parties desire a written document formalizing
and defining their relationship and evidencing the terms of their
agreement;
THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, it is agreed as follows:
DEFINITIONS AND INTERPRETATIONS
1. CAPTIONS AND SECTION NUMBERS
The headings and section references in this Consulting Agreement are for
convenience of reference only and do not form a part of this Consulting
Agreement and are not intended to interpret, define or limit the scope,
extent or intent of this Consulting Agreement or any provisions thereof.
COMPANY Initial /s/CLA CABI Initial /s/DSR
------ ------
1
<PAGE> 2
2. EXTENDED MEANINGS
The words "hereof", "herein", "hereunder", "hereto" and similar
expressions used in any clause, paragraph or section of this Consulting
Agreement and any Addendums and/or Exhibits attached to this Consulting
Agreement will relate to the whole of this Consulting Agreement including
any attached Addendums and/or Exhibits and not to that clause, paragraph
or section only, unless otherwise expressly provided.
3. SECTION REFERENCES AND SCHEDULES
Any reference to a particular "article", "section", "paragraph" or other
subdivision of this Consulting Agreement and any reference to a schedule,
exhibit or addendum by name, number and/or letter will mean the
appropriate schedule, exhibit or addendum attached to this Consulting
Agreement and by such reference is incorporated into and made part of this
Consulting Agreement.
AGREEMENT
4. AUTHORITY AND DESCRIPTION OF SERVICES
During the term of this Consulting Agreement CABI shall furnish various
professional services and advice as specifically requested by an
authorized representative of COMPANY. Said professional services and
advice shall relate to those services, items and/or subjects described in
Addendum "A", which is attached hereto and made a part hereof by this
reference, and/or as follows:
a. CABI shall act, generally, as corporate investor relations counsel,
essentially acting (1) as liaison between COMPANY and its shareholders;
(2) as advisor to COMPANY with respect to existing and potential market
makers, broker-dealers, underwriters, and investors as well as being the
liaison between COMPANY and such persons; and (3) as advisor to COMPANY
with respect to communications and information, which may include but is
not necessarily limited to, preparation of advertorials, writing of a
corporate profile, preparation of a research report, planning, developing,
designing, organizing, writing and distributing such communications and
information.
b. CABI shall assist in establishing, and advise COMPANY with respect
to: interviews of COMPANY officers by the financial media; interviews of
COMPANY officers by analysts, market makers, broker-dealers, and other
members of the financial community.
c. CABI shall seek to make COMPANY, its management, its products, and
its financial situation and prospects, known to the financial media,
financial publications, broker-dealers, mutual funds, institutional
investors, market makers, analysts, investment advisors, and other members
of the financial community as well as the public generally.
d. CABI, in providing the foregoing services, shall be responsible for
all costs of providing the services, including, but not limited to,
out-of-pocket expenses for postage, delivery service (e.g., Federal
Express), telephone charges, compensation to third party vendors,
copywriters, staff writers, art and graphic personnel, subcontractors,
printing, etc.
e. CABI's compensation under this Consulting Agreement shall be deemed
to include the above mentioned costs and expenses, unless otherwise
expressly provided herein.
5. TERM OF AGREEMENT
This agreement shall become effective upon execution hereof and shall
continue thereafter and remain in effect for a period of 12 Months and/or
in the case of specific services as described in Addendum "A" attached
hereto, until such time as such matters are finalized to the satisfaction
of both COMPANY and CABI. It is expressly acknowledged and agreed by and
between the parties hereto that CABI shall not be obligated to provide any
services and/or perform any work related to this Consulting Agreement
until such time any agreed and/or specified retainer (deposit, initial
fee, down-payment) in U.S. funds, and/or other specified and/or agreed
valuable consideration, has been received by CABI.
6. DUTIES OF COMPANY
COMPANY shall promptly supply CABI: with full and complete copies of all
filings with all federal and state securities agencies; with full and
complete copies of all shareholder reports and communications whether or
not prepared with the assistance of CABI; with all data and information
supplied to any analyst, broker-dealer, market maker, or other member of
the financial community; and with all product/services brochures, sales
materials, etc.
Company Initial /s/CLA CABI Initial /s/DSR
------ ------
2
<PAGE> 3
7. REPRESENTATION AND INDEMNIFICATION
a. COMPANY hereby agrees to hold harmless and indemnify CABI against
any claims, demands, suits, loss, damages, etc., arising out of CABI's
reliance upon the instant accuracy and continuing accuracy of such facts,
materials, information, and data, unless CABI has been negligent in
performing its duties and obligations hereunder.
b. COMPANY shall cooperate fully and timely with CABI to enable CABI
to perform its duties and obligations under this Consulting Agreement.
c. The execution and performance of this Consulting Agreement by
COMPANY has been duly authorized by the Board of Directors of COMPANY in
accordance with applicable law, and, to the extent required, by the
requisite number of shareholders of COMPANY.
d. The performance by COMPANY of this agreement will not violate any
applicable court decree or order, law or regulation, nor will it violate
any provision of the organizational documents and/or bylaws of COMPANY or
any contractual obligation by which COMPANY may be bound.
e. COMPANY shall promptly deliver to CABI a complete due diligence
package to include latest 10K, latest 10Q, last 6 months of press releases
and all other relevant materials, including but not limited to corporate
reports, brochures, etc.
f. COMPANY shall promptly deliver to CABI a list of names and
addresses of all shareholders of COMPANY of which it is aware. This
shareholder list shall be upgraded at CABI's request. COMPANY agrees to
furnish to CABI a copy of all DTC sheets on a weekly basis.
g. COMPANY shall promptly deliver to CABI a list of all brokers and
market makers of COMPANY's securities, known to COMPANY, which have been
following COMPANY.
h. CABI's activities pursuant to this Consulting Agreement or as
contemplated by this Consulting Agreement do not constitute and shall not
constitute acting as a securities broker or dealer under federal or state
securities laws; any contact between CABI and a potential investor in
COMPANY shall be such that CABI would be acting merely as a promoter,
finder or consultant with respect to such prospective investor obligations
under this agreement.
8. COMPENSATION
a. Compensation and/or fees payable to CABI for all general investor
relations services, public relations services and all other services
hereunder, including but not limited to funding, financing, promotional,
acquisition and merger services, shall be paid by COMPANY to CABI by the
means and in the manner or manners as described in "Addendum A", a copy of
which is attached hereto and incorporated herein by this reference.
b. All moneys payable hereunder shall be in U.S. funds and drawn on
U.S. banks. The parties acknowledge that in negotiating this compensation
and/or fee(s) they recognized that the services will probably not be
performed in equal monthly segments, but may be substantial during the
earlier portion of the term and less thereafter as relationships and
communication lines are established, or visa-versa. Thus, part of the
compensation for earlier services will be deferred and therefore any
lessening of services shall not constitute a breach or termination hereof
and the level compensation or fee shall continue.
c. For all special services, not within the scope of this Consulting
Agreement, COMPANY shall pay to CABI such compensation and/or fee(s) as,
and when, the parties shall determine in advance of performance of said
special services, provided COMPANY has agreed to said special services.
9. BILLING AND PAYMENT
Monthly fees or payments shall be due and payable without billing. Billing
and payments for special services shall be as agreed on a case by case
basis. COMPANY acknowledges and agrees that deposits, initial payments,
down payments, partial payments, payments for special services, monthly
fees or monthly payments shall be by wire to CABI's bank account upon
execution of any agreement or agreements, or; upon payment due date in the
case of monthly fees or monthly payments, or; in the case of special
services by the first day of the preceding month that work is scheduled to
be performed, unless expressly provided otherwise in writing, and that if
such funds are not received by CABI by said date COMPANY shall pay to CABI
an additional operations charge equal to 1% for each fifteen (15) day
period said funds are not received.
10. AMENDMENTS
This agreement may be modified or amended, provided such modifications or
amendments are mutually agreed upon by and between the parties hereto and
that said modifications or amendments are made in writing and signed by
both parties.
COMPANY Initial /s/CLA CABI Initial /s/DSR
------ ------
3
<PAGE> 4
11. SEVERABILITY
If any provision of this agreement shall be held to be contrary to law,
invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision
of this agreement is contrary to law, invalid or unenforceable, and that
by limiting such provision it would become valid and enforceable, then
such provision shall be deemed to be written, construed, and enforced as
so limited.
12. TERMINATION OF AGREEMENT
This Consulting Agreement may not be terminated by either party prior to
the expiration of the term provided in Paragraph 5 above except as
follows:
a. Upon the bankruptcy or liquidation of the other party; whether
voluntary or involuntary;
b. Upon the other party taking the benefit of any insolvency law;
and/or
c. Upon the other party having or applying for a receiver appointed
for either party.
d. As provided for in Paragraph 16 below.
a. Upon sale or change of ownership of COMPANY.
a. After six (6) months COMPANY may opt to terminate contract by
serving CABI with a thirty (30) day notice of intent to terminate.
b. Upon termination all unexercised options will be null and void.
13. ATTORNEY FEES
In the event either party is in default of the terms or conditions of this
Consulting Agreement and legal action is initiated or suit be entered as a
result of such default, the prevailing party shall be entitled to recover
all costs incurred as a result of such default including all costs,
reasonable attorney fees, expenses and court costs through trial, appeal
and to final disposition.
14. NON-WAIVER
The failure of either party, at any time, to require any such performance
by any other party shall not be constructed as a waiver of such right to
require such performance, and shall in no way affect such party's right to
require such performance and shall in no way affect such party's right
subsequently to require full performance hereunder.
15. DISCLAIMER BY CABI
CABI shall be the preparer of certain promotional materials, and; CABI
makes no representation to COMPANY or others that; (a) its efforts or
services will result in any enhancement to COMPANY (b) the price of
COMPANY'S publicly traded securities will increase (c) any person will
purchase COMPANY's securities, or (d) any investor will lend money to
and/or or invest in or with COMPANY.
16. EARLY TERMINATION
In the event COMPANY fails or refuses to cooperate with CABI, or fails or
refuses to make timely payment of the compensation set forth above and/or
in Addendum "A", CABI shall have the right to terminate any further
performance under this agreement. In such event, and upon notification
thereof, all compensation shall become immediately due and payable and/or
deliverable, and CABI shall be entitled to receive and retain the same as
liquidated damages and not as a penalty, in lieu of all other remedies the
parties hereby acknowledge and agree that it would be too difficult
currently to determine the exact extent of CABI's damages, but that the
receipt and retention of such compensation is a reasonable present
estimate of such damage.
17. LIMITATION OF CABI LIABILITY
In the event CABI fails to perform its work or services hereunder, its
entire liability to COMPANY shall not exceed the lessor of; (a) the amount
of cash compensation CABI has received from COMPANY under Paragraph 13
above (b) the amount of cash compensation CABI has received from COMPANY
under Addendum "A", or (c) the actual damage to COMPANY as result of such
non-performance. In no event shall CABI be liable to COMPANY for any
indirect, special or consequential damages, nor for any claim against
COMPANY by any person or entity arising from or in any way related to this
agreement.
18. MISCELLANEOUS
a. Currency: In all instances, references to dollars shall be deemed
to be United States Dollars.
b. Stock: In all instances, references to stock shall be deemed to be
unrestricted and free trading.
COMPANY Initial /s/CLA CABI Initial /s/DSR
------ ------
4
<PAGE> 5
19. NOTICES
All notices hereunder shall be in writing and addressed to the party at
the address first set forth above, or at such other address which notice
pursuant to this section may be given, and shall be given by either
personal delivery, regular mail, certified mail, express mail or other
courier services. Notices shall be deemed given upon the earlier of actual
receipt or three (3) business days after being mailed or delivered by
courier service to such address. Any notices to be given hereunder shall
be effective if executed by and sent by the attorneys for the parties
giving such notice, and in connection therewith the parties and their
respective counsel agree that in giving such notice such counsel may
communicate directly in writing with such parties to the extent necessary
to give such notice.
20. EXCLUSION WITH RESPECT TO PARTNERSHIP
The parties agree that, in no way, shall this Consulting Agreement be
construed as being an act of partnership between the parties hereto and
that no party hereto shall have, as a result of the execution of this
Consulting Agreement, any liability for the commitments of any other party
of any type, kind or sort.
21. TIME IS OF THE ESSENCE
Time is hereby expressly made of the essence of this Consulting Agreement
with respect to the performance by the parties of their respective
obligations hereunder.
22. ENUREMENT
This Consulting Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors, assigns and any
addenda's attached hereto.
23. ENTIRE AGREEMENT
This Consulting Agreement contains the entire agreement of the parties and
may be modified or amended only by agreement in writing, signed by the
party against whom enforcement of any waiver, change, amendment,
modification, extension or discharge is sought. It is declared by both
parties that there are no oral or other agreements or understanding
between them affecting this Consulting Agreement, or relating to the
business of CABI. This agreement supersedes all previous agreements
between CABI and COMPANY.
24. APPLICABLE LAW
This Agreement is executed pursuant to and shall be interpreted and
governed for all purposes by the laws of the State of Florida for which
the Courts in Orange County, Florida shall have jurisdiction. If any
provision of this Consulting Agreement is declared void, such provision
shall be deemed severed from this agreement, which shall otherwise remain
in full force and effect.
25. EXECUTION IN COUNTERPART; TELECOPY-FAX
This Consulting Agreement may be executed in counterparts, not
withstanding the date or dates upon which this Consulting Agreement is
executed and delivered by any of the parties, and shall be deemed to be an
original and all of which will constitute one and the same agreement,
effective as of the reference date first written above. The fully executed
telecopy (fax) version of this Consulting Agreement shall be construed by
all parties hereto as an original version of said Consulting Agreement.
IN WITNESS WHEREOF, the parties hereto have set their hands in
execution of this agreement.
For and in behalf of; COMPANY: For and in behalf of; CABI:
CURTIS L. ALLISTON CAPITAL ACCESS BUREAU, INC.
JUGAL K. TANEJA
By /s/Curtis L. Allison By /s/David S. Robinson
---------------------------------- ----------------------------
CURTIS L. ALLISTON, PRES. & COO DAVID S. ROBINSON, PRESIDENT
By /s/Jugal K. Taneja
----------------------------------
JUGAL K. TANEJA, CEO
COMPANY Initial /s/CLA CABI Initial /s/DSR
------ ------
5
<PAGE> 6
CONSULTING AGREEMENT
ADDENDUM "A"
Page 1 of 3 pages
COMPENSATION TO CABI
(A.) Valuable Compensation due CABI - Total U.S. Dollar value;
$ Three Hundred Fifty thousand Dollars ($350,000.), payable as follows:
(B.) $ ______ZERO____________________________ in U.S. Dollars; (and) (or)
(C.) Valuable Compensation due CABI as per following schedule:
1. 14,583. Shares due upon execution of Consulting Agreement.
2. 14,583. Shares due July 18,1997
3. 14,583. Shares due August 22,1997
4. 14,583. Shares due September 26,1997
5. 14,583. Shares due October 24,1997
6. 14,583. Shares due November 28,1997
7. 14,583. Shares due January 3,1998
8. 14,583. Shares due February 7,1998
9. 14,583. Shares due March 14,1998
10. $43,750. Payable quarterly in shares at current market value
with first quarterly payment due August 18,1997.
(D.) CABI agrees to accept compensation in the form of restricted and
unregistered shares of common stock of the Company. Such shares value is to be
determined by averaging the closing bid of the stock over the five (5) days
preceding the due dates in paragraph (A.). Company agrees to register shares to
meet requirements of this agreement.
(E.) COMPANY Stock Options which, if any, such Stock Options are described as
follows;
1) Incentive Stepped Options
stepped up in Six steps of seventy-five thousand 75,000 shares each
step; stepped up in Fifty (cent) increments per each step; and
beginning at $1.50 (dollars) 2) CABI AGREES TO EXECUTE ANY IN THE
MONEY OPTIONS QUARTERLY THROUGHOUT THE TERM OF THE AGREEMENT.
(F.) COMPANY acknowledges and agrees CABI shall not provide or continue to
provide services until all such compensation(s) or fee(s) are paid as agreed
herein. COMPANY acknowledges that it has verified with its corporate council,
accountants, corporate officers, board of directors, executive decision makers,
and appropriate stock exchanges that said compensation, fee or stock can, in
fact, be timely delivered to CABI as agreed.
For and in behalf of COMPANY: For and in behalf of CABI:
NATIONAL DIAGNOSTICS, INC. CAPITAL ACCESS BUREAU, INC.
BY /s/Curtis L. Allison BY /s/David S. Robinson
------------------------------- ----------------------------
CURTIS L. ALLISTON, PRES. & COO DAVID S. ROBINSON, PRESIDENT
BY /s/Jugal K. Taneja
------------------------------
JUGAL K. TANEJA, CEO
COMPANY Initial /s/CLA CABI Initial /s/DSR
------ ------
6
<PAGE> 7
CONSULTING AGREEMENT
ADDENDUM "A"
Page 2 of 3 pages
STOCK COMPENSATION AGREEMENT
(1.) It is mutually agreed by and between the parties hereto that in the
event CABI opts or agrees to accept COMPANY's stock, either now or in the
future, as full or partial payment for any part or portion of CABI's
compensation or fee under this Consulting Agreement, that the number of
such shares necessary for such compensation shall be determined pursuant
to a averaging formula or computation that is based upon the 5 day
previous average bid price as of the date of execution of this Consulting
Agreement or upon the 5 day previous average bid price as of the date of
actual transfer of said shares to CABI's account, or upon such other
subsequent written agreement for CABI to accept said stock as alternative
compensation.
(2.) COMPANY acknowledges and agrees CABI shall not provide or continue to
provide services until all such alternative compensation(s) and/or fees
are paid. COMPANY acknowledges that it has verified with its corporate
council, accountants, corporate officers, board of directors, executive
decision makers, and appropriate stock exchanges that said stock can, in
fact, be timely delivered to CABI as agreed.
For and in behalf of COMPANY: For and in behalf of CABI:
NATIONAL DIAGNOSTICS, INC. CAPITAL ACCESS BUREAU, INC.
/s/Curtis L. Alliston /s/David S. Robinson
------------------------------- ----------------------------
CURTIS L. ALLISTON, PRES. & COO DAVID S. ROBINSON, PRESIDENT
/s/Jugal K. Taneja
-------------------------------
JUGAL K. TANEJA, CEO
COMPANY Initial /s/CLA CABI Initial /s/DSR
------ ------
7
<PAGE> 8
CONSULTING AGREEMENT
ADDENDUM "A"
Page 3 of 3 pages
GENERAL DESCRIPTION OF CABI SERVICES
(A.) Market Relations
(B.) Direct Marketing
(C.) Public Relations
(D.) Promotion
(E.) Funding
For and in behalf of COMPANY: For and in behalf of CABI:
NATIONAL DIAGNOSTICS, INC. CAPITAL ACCESS BUREAU, INC.
/s/Curtis L. Alliston /s/David S. Robinson
-------------------------------- -----------------------------
CURTIS L. ALLISTON, PRES. & COO DAVID S. ROBINSON, PRESIDENT
/s/Jugal K. Taneja
--------------------------------
JUGAL K. TANEJA, CEO
DATE DATE 5/27/97
COMPANY Initial /s/CLA CABI Initial /s/DSR
------ ------
8
<PAGE> 1
EXHIBIT 10.46
FUNDING AGREEMENT
(Short Form)
THIS FUNDING AGREEMENT made this 27th day of May, 1997 by and between
Capital Access Bureau, Inc.
Premiere Point North
225 Westmonte Dr./Suite 1170
Altamonte Springs, Florida 32714
Tel: (407) 865 - 9857
Fax: (407) 865 - 9434
a Florida corporation, (hereinafter referred to as "CABI"), and
National Diagnostics, Inc.
751 West Brandon Blvd.
Brandon, Florida 33511
(813) 661-9501
(hereinafter referred to as "COMPANY"),
collectively FINDER and COMPANY hereinafter to as "the parties".
WITNESSETH:
WHEREAS FINDER is in the business of providing funding sources,
funding services, funding introductions, funding source location, funding
coordination services, funding liaison services and other related services and
COMPANY wishes to engage the services of FINDER in connection therewith and
WHEREAS FINDER has expertise and contacts valuable to COMPANY and
FINDER desires to make them available to COMPANY upon terms set forth herein;
and
WHEREAS COMPANY is in need of funding in the exact or approximate
amount of; $2,000,000 in U. S. funds and FINDER has the ability to render
services on behalf of the COMPANY for the purpose of assisting COMPANY in
obtaining said funding and for said amount, or in a lesser amount as partial
funding;
THEREFORE, the Parties agree as follows;
1. INTRODUCTION AND FINDER'S FEES:
That if FINDER's introduction to a funding source is instrumental in COMPANY
securing funding through a previously disclosed or undisclosed third party
transaction, and/or FINDER'S introduction to any other funding source results
in COMPANY securing full or partial funding, FINDER is entitled to a finder's
fee amounting to ten percent (10%) of the
U.S. dollar amount of such funding, or such other valuable consideration if
not in actual cash funds, received by COMPANY.
2. PAYMENT OF FINDER'S FEES:
The above mentioned finder's fee is paid to FINDER in the following manner;
(a) 100% or $200,000 to be wire transferred to FINDER's corporate account,
within (2) banking and/or business days after receipt of said funding by
COMPANY.
3. OTHER FEES AND RELATED COSTS:
That it is fully understood by all parties hereto, and agreed, that COMPANY is
under no obligation to pay any other fees, charges or costs related hereto
(with the exception of the aforementioned finder's fee and related bank and/or
escrow fees) as a result of this agreement.
1
<PAGE> 2
4. NON-WAIVER:
The failure of either party, at any time, to require any such performance by
any other party shall not be construed as a waiver of such right to require
such performance and shall in no way affect such party's right to require such
performance and in no way shall affect such party's right subsequently to
require full performance hereunder.
5. GENERAL:
(a) Entire Agreement: This funding Agreement is the entire agreement
between the parties. No change, addition, alteration or erasure
of any portion of this Funding Agreement shall be valid or
binding upon either party. It is declared by all parties hereto
that there are no oral other agreements or understandings between
them affecting this Funding Agreement, or relating to the
business of FINDER. This agreement supersedes all previous
agreements between FINDER and COMPANY.
(b) Applicable Law: this Funding Agreement is executed pursuant to
and shall be interpreted under the laws of the State of Florida
for which the Courts in Seminole County, Florida shall have
jurisdiction.
(c) Breach: In the event of a breach in the performance of any item
contained herein, the defaulting party agrees to pay all costs of
enforcing this Funding Agreement either by arbitration or
litigation or any right arising out of the breach thereof
including a reasonable attorney's fee.
(d) Term of Agreement: the term of this Funding Agreement shall be
for a period of one (1) year from the date of execution hereof.
(e) Exclusivity: It is expressly understood by all parties hereto
that FINDER does have exclusive right in efforts to acquire said
funding for COMPANY for a period of 45 days.
IN WITNESS WHEREOF, the parties have hereunto set their respective
hand(s) the day and year first above written.
For and in behalf of COMPANY: For and in behalf of CABI:
National Diagnostics, Inc. Capital Access Bureau, Inc.
/s/Curtis L Alliston /s/David S. Robinson
- ----------------------------------- ---------------------------------
By: Curtis L. Alliston, Pres./COO By: David S. Robinson, President
/s/Jugal K. Taneja
- -----------------------------------
By: Jugal K. Taneja, CEO
Date: 5/29/97 Date: 5/29/97
2
<PAGE> 1
EXHIBIT 10.47
RADIOLOGY SERVICES AGREEMENT
THIS RADIOLOGY SERVICES AGREEMENT ("Agreement") is made this 1st day of August
1997, by and between BRANDON DIAGNOSTIC CENTER, LTD.,and SUNPOINT DIAGNOSTIC
CENTER, INC., a corporation incorporated under the laws of the State of Florida
("Corporation"), and NANCY C. LAWHON, M.D., P.C., a Florida professional
corporation, duly authorized to do business in Florida ("PC").
WITNESSETH
WHEREAS, Corporation requires the services of a radiologist licensed to practice
medicine in the State of Florida; and
WHEREAS, PC is organized to engage in the practice of medicine, specializing in
radiology; and
WHEREAS, PC desires to provide radiology services to Corporation through its
shareholder, Nancy C. Lawhon, M.D. ("Physician"); and
WHEREAS, PC desires to contract with Corporation upon the terms and conditions
set forth herein;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:
Section 1. Term.
The initial term of this Agreement shall be for a period of three (3) years
commencing on August 1, 1997, (the "Commencement Date") and shall be
automatically renewed for an additional three (3) year term, unless PC's
services are terminated sooner pursuant to the provisions of Section 7 hereof.
Section 2. Services.
2.1 PC and Physician Duties. During the term of this Agreement, PC
shall provide Physician to deliver professional radiology services (the
"Services") on behalf of Corporation. PC agrees that either PC, Physician, or
both, as Corporation may require and to the extent permissible by law, shall
(a) devote such time and effort as is required to perform the duties required
of the radiologist by the Corporation; (b) provide the Services at locations
approved by Corporation; (c) participate in managed care arrangements entered
into by Corporation and affiliated parties; (d) cooperate with, participate in,
and comply with, the quality assurance, risk management and peer review
programs, grievance procedures and utilization control mechanisms implemented
by
1
<PAGE> 2
Corporation and its respective affiliates; (e) participate in the Medicare and
Medicaid programs and to provide nondiscriminatory medical treatment for
Medicare and Medicaid patients; (f) provide medical care in a nondiscriminatory
manner to charity and indigent patients of Corporation in accordance with the
policies and guidelines established by Corporation; (g) promote and market the
services of Corporation; and (h) perform such other duties relating to the
provision of services as may be requested from time to time by the Chief
Executive Officer ("CEO") of Corporation.
2.2 On-Call Scheduling. Corporation shall use its best efforts
to take into account the input of Physician in developing an on-call schedule.
2.3 Services Provided. Corporation shall determine which
radiological activities shall be undertaken by Physician on behalf of
Corporation.
2.4 Physician Coverage. Corporation shall provide, on a periodic
basis, a coverage schedule, which may include Saturday coverage, detailing
times Physician shall provide the Services. Physician shall receive 30 days
advance notice of each coverage schedule. Physician shall be subject to
providing additional coverage as needed on a non-discriminatory basis with
other physicians providing professional radiology services for Corporation.
2.5 Pensacola Facility. Corporation agrees that in the event it
enters into an Agreement to provide Services in Pensacola, Florida, PC shall be
entitled to the first right of refusal to provide Services under such
Agreement.
Section 3. Professional Income.
To the extent permitted by law, Physician hereby assigns all charges and income
derived from the Services accepted or undertaken by Physician on behalf of
Corporation at Corporation's diagnostic imaging facility during the term of
this Agreement. Charges, fee schedules, and coding for the Services rendered to
patients by Physician shall be established by Corporation. Physician shall
record, daily and accurately, the Services rendered by Physician and the
charges therefor on forms supplied by Corporation. Corporation shall be
responsible for all billing and collection activities relating to the Services
performed by Physician pursuant to this Agreement.
Physician agrees that all fees and charges arising out of Physician's Services
on behalf of Corporation during the term of the Agreement, as well as payments
for services rendered to the patients of the Corporation prior to the
commencement Date hereof for which Physician has not yet been compensated are
hereby assigned by Physician to Corporation. Physician hereby assigns and
transfers to Corporation all right, title and interest of Physician to any fees
or charges (whether in cash, accounts, goods or other property of value)
resulting from or incident to Physician's provision of Services pursuant to the
Agreement and Physician does hereby appoint Corporation as Physician's agent
and attorney-in-fact to bill and collect the same.
2
<PAGE> 3
4. PC Warranties. PC represents and warrants to Corporation that Physician is
duly licensed to practice medicine in the State of Florida. PC further
represents and warrants to that (i) Physician's license to practice medicine in
any state (and Physician's permit to dispense or prescribe drugs and other
controlled substances) has never been suspended, restricted or revoked (ii)
Physician has never been reprimanded, sanctioned or disciplined by any
government entity, licensing board or state or local medical society or
specialty board; (iii) Physician has never been denied membership or
reappointment of membership on the medical staff of any hospital, that no
hospital medical staff membership or clinical privileges of Physician have ever
been suspended, curtailed or revoked, and that Physician has never voluntarily
withdrawn an application for appointment or reappointment to the medical staff
of any hospital ; (iv) all information provided by Physician or PC to
Corporation and all information contained in any application for clinical
privileges at the Corporation's diagnostic center or other health care provider
is true and correct; (v) no application of Physician or PC for professional
liability insurance or renewal thereof has ever been denied, and no such
insurance policy has ever been terminated; and (vi) Physician has never been
convicted of or pled guilty, including, but not limited to, a plea of nolo
contendere, to a crime except for minor traffic offenses. PC shall update all
such information as needed to maintain its accuracy when and if any change to
such information occurs.
Section 5. Performance Standards.
In performing Services under this Agreement, PC agrees that Physician shall (i)
use diligent efforts and professional skill and judgement; (ii) perform
professional services in accordance with recognized standards of the medical
professional, (iii) act in a manner consistent with the Principles of Medical
Ethics of the American Medical Association; (iv) comply with the by-laws,
policies, rules and regulations of Corporation; (v) comply with applicable
standards of the Joint Commission on Accreditation of Healthcare Organizations
("JCAHO"); and (vi) comply with all applicable federal, state and local laws
and regulations. Notwithstanding the foregoing, Physician shall exercise
independent professional judgement in performing medical services related to
the medical condition of patients, and Physician shall be solely responsible
for the provision of medical services to patients in accordance with the
standard of practice of the community in which Physician renders medical
services and in a manner that will assure quality of care and treatment.
Nothing in this Agreement shall be construed as giving Corporation control over
the professional, clinical judgement of Physician.
Section 6. Compensation.
6.1 Compensation.
(i) Compensation. PC shall be compensated in the amount of
$220,000.00 annually during the term of the Agreement.
(ii) Medical Directorship. PC shall be compensated in the amount
of $15,000.00 annually during the term of the Agreement. PC will be
responsible for scheduling and managing all physician services and all other
independent contractors.
3
<PAGE> 4
(iii) CME Allowance Annually. PC shall receive $8,000.00 during
the term of the Agreement.
(iv) Health, Disability and Life Insurance Allowance Annually.
PC shall receive $7,000.00 allowance to help defray cost of health, disability
and life insurance coverage.
(v) Malpractice Insurance Allowance Annually. PC shall receive
$12,000.00 allowance.
6.2 Office Space. During the term of this Agreement,
Corporation shall provide PC with professional office space at no cost to PC,
which PC may use for the performance of its duties hereunder.
6.3 Equipment and Supplies. During the term of this agreement,
Corporation shall provide expendable and non-expendable medical equipment,
drugs, supplies, furniture, and fixtures which Corporation determines, in its
sole discretion, to be necessary for the proper operation of the Corporation's
diagnostic center.
6.4 Utilities and Support Services. Corporation shall provide
all utilities, housekeeping, laundry and other non-medical support services as
may be required, in the discretion of Corporation, for the proper operation of
the Corporation's diagnostic center.
6.5 Vacation, Sick and Continuing Education Leave. Corporation agrees
that PC may provide physician with eight (8) weeks of vacation, sick and
continuing medical education leave during each year of this Agreement. PC
agrees that unused leave may not be carried forward from one year to the next
by physician without the specific permission of corporation. During Physician's
vacation, sick or continuing education leave, Corporation shall arrange for
coverage of the corporation's diagnostic center. PC agrees to provide
Corporation with at least 30 days advance notice of impending vacation or
continuing medical education leave by Physician.
6.6 Malpractice Insurance. During the Term of this Agreement, PC shall
maintain, at its expense, professional malpractice liability insurance covering
PC and Physician for services rendered on behalf of Corporation pursuant to
this Agreement in an amount not less than $1,000,000.00 per claim,
$3,000,000.00 in the aggregate (the "Insurance Limits"). PC shall furnish proof
of such coverage prior to the furnishing of Services pursuant to this
Agreement, and agrees to immediately provide Corporation with notice of any
termination, modification, or amendment of such coverage. If the professional
malpractice insurance provided by PC pursuant to this Section 6.6 is a
"claims-made" policy, then, upon termination of this Agreement, unless PC
obtains a new professional malpractice liability insurance policy which
includes coverage for acts occurring during the term hereof and maintains such
policy in full force and effect for a period following termination of this
Agreement equal to the statute of limitations for medical malpractice actions
then applicable in the State of Florida, PC shall purchase and maintain
reporting endorsement ("tail") coverage for its acts, and the acts of
Physician, while performing services pursuant to this Agreement; provided,
however, that in the event this Agreement is terminated by Corporation without
case, or by PC for cause, then Corporation shall purchase and maintain such
reporting endorsement ("tail") coverage.
4
<PAGE> 5
Section 7. Termination.
7.1 Automatic Termination. This Agreement shall automatically
terminate upon the death or permanent disability of the Physician. As used
herein, the term "permanent disability" shall mean a physical or mental
impairment which either (a) satisfies the requirements for instituting payment
under any disability insurance policy covering the Physician; or (b) renders
the Physician incapable, in the judgement of an independent licensed physician
selected by the Corporation, of providing substantially the Services required
of the Physician hereunder for a period in excess of thirty (30) days.
7.2 Termination for Cause by Corporation. Corporation shall have the
right to terminate PC's services under this Agreement immediately, with cause,
upon written notice to PC if:
(i) Physician's license to practice medicine (or permit or license
to dispense or prescribe drugs or controlled substances) in any State shall
have been revoked, suspended or restricted; or
(ii) Physician fails to become credentialed in accordance with
Corporation policy; or
(iii) Physician's or PC's right to participate in the Medicare or
Medicaid programs shall have been revoked, suspended, or restricted; or
(iv) Physician is found to have engaged in unprofessional conduct by
any governmental entity or professional organization; or
(v) PC breaches a warranty contained in this Agreement; or
(vi) Physician makes a material misrepresentation or omission of
information in an application for employment or staff privileges with any
hospital, physician hospital organization, or any other health care provider;
or
(vii) Physician has been adjudicated or pled guilty (by a plea of nolo
contendere or otherwise) of criminal charges filed against her which related to
her professional activities; provided, however, Physician shall be suspended
from her duties hereunder, without pay, so long as such criminal charges are
pending; or
(viii) Physician shall commit an act or omit to take an act that in
the good faith and reasonable belief of Corporation, jeopardized, or could have
jeopardized, patient health or safety; or
(ix) Physician becomes ineligible for professional liability
insurance coverage sufficient to meet the terms of Paragraph 6.6; or
(x) PC materially breaches this Agreement and fails to cure the same
within ninety (90) days after written notice from Corporation specifying the
breach and requesting that it be cured; or
5
<PAGE> 6
(xi) Physician possesses, uses, or is under the influence of alcohol
during working time; illegally uses controlled substances; or if Physician's
use of controlled substances or alcohol, legal or illegal, impairs her ability
to perform her duties hereunder as determined by an examination of an
independent licensed physician selected by the Corporation. PC agrees that
Physician shall submit to a medical examination upon the reasonable suspicion
of the Corporation.
7.3 Termination for Cause by PC. PC shall have the right to
terminate PC's services under this Agreement, immediately, with cause, upon
written notice to Corporation if;
(i) Corporation's right to participate in the Medicare or Medicaid
programs shall have been revoked, suspended, or restricted; or
(ii) Corporation materially breaches this Agreement and fails to cure
the same within ninety (90) days after written notice to Corporation specifying
the breach and requesting that it be cured.
7.4 Termination Without Cause. PC's services under this Agreement
may be terminated without cause if;
(i) Corporation and PC mutually agree in writing; or
(ii) either Corporation or PC gives the other ninety (90) days prior
written notice of its intent to terminate PC's services, or
(iii) either Corporation or PC gives the other written notice no later
than ninety (90) days prior to the end of the initial or any renewal term.
7.5 Effect of Termination. Except as expressly provided otherwise
elsewhere in this Agreement, upon the effective date of termination of PC's
services under this Agreement for any reason or PC's failure or refusal to
perform services hereunder, all obligations of Corporation to make payments to
PC of any form or nature shall cease (except for obligations to make payments
to PC for services performed or reimbursable expenses incurred prior to the
effective date of such termination of PC's services). The provisions of Section
9 and the other provisions of this Agreement relating to the interpretation and
application of such Section shall expressly survive termination of PC's
services under this Agreement, as will PC's and Physician's assignment of
payments for any services rendered to the patients f the Corporation prior to
the Commencement Date hereof for which PC has not yet been compensated by
Corporation.
Section 8. Independent Contractor. PC understands and agrees that neither PC
nor Physician shall be considered to be an employee of the Corporation; during
the term of this Agreement, PC shall be classified as an independent
contractor; and PC shall be wholly and exclusively responsible and shall pay
when due any and all taxes, fees, and assessments (and all interest and
penalties thereon) of every kind and nature arising by reason of, or in
connection with, PC performance hereunder, it being the intention of the
parties that the Corporation shall not be responsible or charged for any such
sums whatsoever. Without limiting the generality of the preceding sentence, and
taxes or contribution Act, Federal Unemployment Tax Act, federal and state
withholding, and
6
<PAGE> 7
similar taxes and withholding, shall be paid by and shall be the exclusive
liability of PC and shall in no way be chargeable to the Corporation. Except
for the payments provided herein, PC shall not be eligible for any other
payments or benefits that are or may be provided to Corporation's employees. PC
shall be wholly and exclusively responsible for Physician's medical, life, and
other insurance coverages.
Section 9 Covenants.
PC acknowledges that Corporation may assign this Agreement pursuant to
the terms of Paragraph 10, including the covenants contained in Paragraphs 9.1,
9.2, and 9.3, and that such assignee is hereby expressly authorized to enforce
these covenants.
9.1 Covenant Not to Compete. PC acknowledges and agrees that this
covenant is intended to protect the investment Corporation has made and will
make in the Corporation's radiology business, and that should PC offer
radiology services during the period of time and in the geographic area
hereinafter set forth, such activity shall be harmful to Corporation and shall
cause Corporation irreparable damage and injury.
PC covenants and agrees that for a period of one (1) year following
the termination of PC's services under this Agreement by Corporation pursuant
to Paragraph 7.2, or by PC pursuant to Paragraph 7.4, PC shall not engage in
the provision of radiology services within a territory defined as a five (5)
mile radius surrounding Corporation (the Brandon Diagnostic Center where PC
will engage in the provision of radiology services), without the prior written
consent of Corporation.
PC acknowledges that this covenant is critical to the success of
Corporation's radiology business, and that violation of this covenant would
immeasurably damage Corporation's radiology business.
9.2 Covenant Not To Solicit Patients or Customers. PC covenants and
agrees that, during the term of this Agreement and for a period of two (2)
years immediately following the date of cessation of PC's provision of services
hereunder, PC shall not, on PC's own behalf or on behalf of any person, firm,
partnership, association, corporation, or business organization, entity, or
enterprise engaged in the provision of radiology services ( a "Competitive
Business"), divert, solicit, appropriate, or attempt to divert, solicit, or
appropriate any Patient or Customer for whom PC provided services pursuant to
this Agreement.
9.3 Covenant Not to Disclose. Independently from the covenants set
forth in Paragraph 9.1 and 9.2, above, PC covenants as follows:
(i) Trade Secrets. PC covenants and agrees that from the date hereof
and for all time PC shall treat as confidential and shall not use, disclose, or
divulge (except in connection with PC's performance of its duties to
Corporation), any and all trade secret information concerning Corporation or
its business obtained by PC during the term of this Agreement. For lists of
actual or potential customers, patients, and referral sources, lists of actual
or potential suppliers, technical and nontechnical data, formulae, patterns,
complications, programs, devices, methods, techniques,
7
<PAGE> 8
drawings, processes, financial data, financial plans, and product plans, which
information is known only to Corporation and those of its employees ir
independent contractors in whom the trade secret must be confided in order to
apply the trade secret to its intended use and from which Corporation derives
actual or potential economic value from he nondisclosure of such information to
persons who can obtain economic value from its disclosure or use.
(ii) Other Information. PC covenants and agrees that, during the term
of this Agreement and for a period of two (2) years immediately following the
date of cessation of PC's services under this Agreement, PC shall treat as
confidential and shall not use, disclose, or divulge (except in connection with
PC performance of PC's duties to Corporation), any confidential business
information regarding Corporation that does not fall within the definition of
"trade secret information" as defined above.
(iii) Return of Information. PC shall, immediately upon termination of
this Agreement, return to Corporation any and all books, paper, documents, or
other embodiments of trade secret information or other information, tangible or
intangible, of Corporation in the possession or withing the reasonable control
of PC, including any and all copies thereof and on any medium stored, and shall
execute under oath a statement verifying that such material has been returned
to Corporation.
9.4 Remedies. PC acknowledges that covenants 9.1, 9.2, and 9.3 are
critical to the success of Corporation's radiology business, and that violation
of the covenants would immeasurable damage Corporation's radiology business. PC
acknowledges and agrees that, by virtue of the duties and responsibilities
attendant to PC's provision of services to Corporation and the special
knowledge of Corporation's affairs, business, patients, and operations that PC
has and will have as a consequence of this relationship, and breach or
violation of the covenants contained in Paragraphs 9.1, 9.2 and 9.3 hereof
would cause irreparable loss or damage to Corporation that may not be issued by
any court of competent jurisdiction enjoining and restraining PC from
committing any violation or threatened violation of this Agreement.
9.5 Severability. The covenants set forth in Paragraphs 9.1, 9.2, and
9.3 of this Agreement shall be construed to be separate and distinct from each
other and every other provision set forth in this Agreement. In the event that
any court of competent jurisdiction shall declare any covenant invalid,
prohibited, or unenforceable, the remaining covenants and obligations shall
remain independent, divisible, and enforceable. Any such unenforceable or
prohibited provision or provisions may be modified in a court of law to the
fullest extent allowed by the law of such jurisidiction so as to allow such
provision or provisions to be written in such a manner and to such an extent as
to be enforceable in such jurisdiciton under the circumstances. Without
limitation of the foregoing, with respect to Paragraphs 9.1, 9.2, and 9.3, if
it is determined that any restriction contained in such provision is excessive
as to duration or scope, it is intended that such restriction be enforced for
such shorter duration or with such narrower scope as will render it
endorceable.
8
<PAGE> 9
Section 10. Compliance with Corporation Rules and Regulations.
In fulfilling its duties hereunder, PC shall, in every respect, comply
with the policies and procedures of Corporation, and PC shall insure the
compliance of Physician with the policies and procedures of Corporation. During
the term of this Agreement and upon termination hereof for any reason, all
patient records, including, but not limited to, x-rays, charts, and billing
records of any patient attended by Physician shall be and remain the property
of Corporation to the extent permitted by law. PC shall maintain all patient
records in accordance with all applicable laws and regulations pertaining to
the confidentiality thereof.
Section 11. Renegotiation.
If Corporation's legal counsel determines that payments or
reimbursements to Corporation or PC, or the ability of the parties hereoto to
fulfill their obligations hereunder, are (or are likely to be) adversely
impacted by any federal, state or local law, rules, regulations, or published
official interpretation of any of the foregoing, as applied to theis Agreement
in a manner which will, if possible, avoid such adverse impact while maintained
the eessential economic benefits intended to be conferred hereby. If this
Agreement is not so amended prior to the effective date of such requirement or
within thirty (30) days after Corporation's notice to negotiate under this
Section, whichever shall first occur, then this Agreement shall terminate, at
the option of Corporation, as of such date and shall be construed as a
termination without cause.
Section 12. Access to Records.
Until the expiration of four (4) years after the furnishing of services
hereunder, PC shall make available, upon written request, to the Secretary of
Health and Human Services, or upon written request, to the Comptroller General
of the United States, or any of their duly authorized representatives, this
Agreement, including all amendments hereto, and books, documents and records of
PC that are necessary to certify the nature and extent of costs for services
provided hereunder.
Section 13. Miscellaneous.
13.1 Successors. All the provisions herein contained shall be binding
upon and inure to the benefit of the respective heirs, personal
representatives, successors and assigns of Corporation and of PC; provided,
however, that nothing contained in this Section 14.1 shall be construed as a
consent by corporation to an assignment of this Agreement or of any interest
herein by PC except as provided in Section 10 above.
13.2 Headings. The headings to the various sections of this Agreement
have been inserted for convenience of reference only and shall not modify,
define, limit or expand the express provisions of this Agreement.
9
<PAGE> 10
13.3 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be an original, and each of such counterparts
shall together constitute but one and the same agreement.
13.4 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been received by the
person to whom it is addressed when delivered if delivered in person or five
(5) days after it is deposited in the United States mail, if mailed by
certified or registered mail, postage prepaid and addressed as follows:
If to PC: Nancy C. Lawhon, M.D., P.C.
5014 Wesley Drive
Tampa, FL 33647
If to Corporation: Brandon Diagnostic Center, Ltd.
SunPoint Diagnostic Center, Inc.
c/o National Diagnostics, Inc.
Attn: Mr. Curtis Alliston, President
755 W. Brandon Blvd.
Brandon, FL 33511
or to such other person and address as either party may designate in writing.
13.5 Effect of Invalidity. Should any part or provision of this
Agreement, for any reason, be declared invalid or illegal, such invalidity or
illegality shall not affect the validity of any remaining portion, which
remaining portion shall remain in force and effect as if this Agreement had
been executed with the invalid or illegal portions thereof eliminated.
13.6 Applicable Law: Rights Cumulative. This Agreement shall be
construed in accordance with the laws of the State of Florida. All rights of
the parties hereunder shall be cumulative with all rights which the parties
hereto may have at law or in equity.
13.7 Amendments. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. Any
amendments to this Agreement shall be in writing and signed by an authorized
representative of Corporation and PC.
13.8 Confidentiality. Except as otherwise required by law, PC agrees
to keep this Agreement and its contents confidential and not to disclose the
same to any third party, except their respective legal or accounting
representatives. With respect to information provided by Corporation in
connection with this Agreement, PC agrees to keep all such information which in
not in the public domain confidential, exercising the same care in handling
such information as he would his own, subject to the provisions of applicable
law.
10
<PAGE> 11
13.9 No Waiver. No waiver of any provision of this Agreement shall be
effective against either party hereto unless it is in writing and signed by the
party granting the waiver. No waiver of any provision hereof shall be deemed a
continuing waiver or a waiver of any other provision hereof.
13.10. Survival. All obligations of the parties which have accrued
as of termination of this Agreement shall survive any termination of this
Agreement. In addition, the provisions of Section 9 and 13 shall survive any
termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
CORPORATION:
BRANDON DIAGNOSTIC CENTER, LTD.
SUNPOINT DIAGNOSTIC CENTER, INC.
By:/s/Curtis L. Alliston
-------------------------------
Curtis L. Alliston, President
PC:
NANCY C. LAWHON, M.D., P.C.
By:/s/Nancy C. Lawhon, M.D.
----------------------------------
Nancy C. Lawhon, M.D., President
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF NATIONAL DIAGNOSTICS, INC. FOR THE 3 MONTHS ENDED JUNE
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 72,874
<SECURITIES> 1,800,000
<RECEIVABLES> 3,076,765
<ALLOWANCES> 735,755
<INVENTORY> 0
<CURRENT-ASSETS> 4,374,035
<PP&E> 9,981,296
<DEPRECIATION> 3,925,262
<TOTAL-ASSETS> 10,945,807
<CURRENT-LIABILITIES> 4,988,043
<BONDS> 4,191,769
0
0
<COMMON> 1,164
<OTHER-SE> 1,176,831
<TOTAL-LIABILITY-AND-EQUITY> 10,945,807
<SALES> 0
<TOTAL-REVENUES> 2,612,347
<CGS> 0
<TOTAL-COSTS> 1,497,338
<OTHER-EXPENSES> 1,257,362
<LOSS-PROVISION> 128,014
<INTEREST-EXPENSE> 188,528
<INCOME-PRETAX> (458,895)
<INCOME-TAX> 0
<INCOME-CONTINUING> (458,895)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (458,895)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
